Wed, Jul 30, 2008 - Page 11 News List

Sony issues profit warning after anemic first quarter

CONVERGING FORCES Increasing price competition, a stronger yen and financial difficulties at Sony Ericsson all took their toll on net earnings, down half from a year ago


Japan’s Sony Corp said yesterday that net earnings in the fiscal first quarter were almost half that of a year earlier, and issued a profit warning as business conditions worsen.

The electronics giant said it was hit by increasing price competition, a stronger yen and financial problems at mobile telephone operator Sony Ericsson.

Net profits fell 47.4 percent to ¥34.98 billion (US$326 million) in the three months to last month as revenue edged up 0.1 percent to ¥1.98 trillion, the company said. Operating profit fell 39.5 percent to ¥73.44 billion.

Sony has endured a difficult few years in the face of tough competition from rival products such as Apple’s iPod and Nintendo’s Wii.

Last year it enjoyed a strong recovery under its first foreign boss, Howard Stringer. But the bottom line is now being pressured by a weak dollar, slowing global economic growth and rising costs for raw materials.

Sony cut its forecast for net earnings for the full fiscal year to next March to ¥240 billion from a previous projection of ¥290 billion. It cut its operating profit target to ¥70 billion from ¥520 billion.

Sony’s core electronics division saw a 57.2 percent plunge in first-quarter operating earnings amid intense competition in digital cameras and laptop computers, as well as the poor performance at Sony Ericsson.

The cellphone operator, jointly owned with Ericsson of Sweden, said earlier this month it was cutting 2,000 jobs worldwide after reporting an operating loss in the last quarter due to difficult market conditions.

Sony’s game division returned to the black in the first quarter with an operating profit of ¥5.4 billion after a loss of ¥29.2 billion a year earlier, helped by lower costs for the PlayStation 3.

Sony introduced a cheaper, slimmed down version of the PS3 in Japan and the US in November, in an attempt to better compete with Nintendo’s more affordable and popular Wii.

The group’s movie division made a quarterly loss in the absence of major blockbusters to match the success of Spider-Man 3, which boosted earnings in the previous year.

Sony has been seeking to shed non-core assets and revive its mainstay electronics business. It has axed thousands of jobs since Stringer, a Welsh-born US citizen, took over in 2005.

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